As a rule, you can improve your chances of obtaining a loan yourself. One instrument for this is the admission of a second applicant. The contract will then not only run on your name, but also on someone else’s name. It does not have to be your life partner. With this double liability, you get a higher credit rating, which results in advantages in the loan itself. However, such a constellation also entails risks, which must be considered before the joint application. Especially after a separation or in case of conflict, ongoing partner loans offer a lot of detonator. What you should know better before signing a joint credit agreement, you will find in our article.
What matters with every loan
There are many factors in having a loan application to succeed. The lender attaches great importance to getting back the money he has lent. Thus, it is only understandable that a bank as a lender, the prospects look for a loan closer. Before making a commitment, credit institutions check the personal and financial situation of the applicant. For example, the maximum amount of future monthly payments depends on income and expenditure. For this, applicants must submit current bank statements and proof of income. For example, anyone who works for the same company for many years or holds a leadership position has better credit prospects than candidates with a fixed-term contract. Negative effects on the creditworthiness are caused, for example, by current loans, the regular use of checking accounts or the overdrawing of the credit card. The exact creditworthiness calculated each donor slightly different.
The credit bureau knows your financial position
In addition to the internal guidelines of the individual financial service providers, the credit bureau property is a strong criterion. Your individual score provides information about your previous behavior in dealing with finances and should predict your future reliability. This assessment is based on whether you have recently gone through debt collection or lending applications failed. In addition, your credit bureau score will be based on data related to, for example, age, home address or gender. Since such parameters are sometimes raised arbitrarily, the credit bureau is in data protection and consumer protection in the permanent criticism. In view of the influence of the credit agency, their lack of traceability and transparency is criticized.
In spite of the opaque operation of credit bureau, you can do two things to improve your score. On the one hand, you should regularly request a self-report. This is once a year for free. If you find faulty or obsolete entries about yourself, you should do something about it (see also: Delete credit bureau entry). On the other hand, it is up to you to protect and improve your credit bureau score. It helps to keep an impeccable balance on your financial affairs. Avoid unnecessary contracts or (installment) loans, pay all bills on time and do not constantly change your registration address. Such examples are well received by the Shufa. They stand for sound and reliable housekeeping and contribute significantly to a positive credit bureau score.
The benefits of a partner loan
A loan with two applicants is intended primarily for consumers whose credit rating is insufficient for the requested loan. This may be due to the individual credit bureau score, which does not meet the requirements of the lender. Another reason may be related to the loan amount. Despite a positive score, it is possible that the conditions are not met here. That may be due to disposable income. If that is too low to be able to meet the required monthly payments safely, this represents a risk for the lender. By law, credit institutions are obliged to examine their budgetary position. Thus they protect themselves from the fact that debtors fail and they do not get their money back. However, this rule also prevents you, as a consumer, from financially taking over and sliding into over-indebtedness.
In order to improve your starting position, you can always offer collateral for your preferred loan or conclude a partner loan. When a second applicant comes into play, the signs for your loan application usually improve. The creditworthiness of the second applicant must, of course, be sufficient for the credit institution. This means that the creditworthiness of your contract partner is also determined by checking salary statements, account statements and the credit bureau score. Through the joint liability of both applicants, the bank increases its security and meets you with the loan and its terms.
Freely disposable income Freely available income refers to an allowance that is required to repay a loan. This amount is calculated by deducting all regular expenditures from your secure earnings. Your monthly spend will have to cover everything from your cell phone costs to food expenses. Keep in mind that annual charges, such as insurance premiums, vacation travel or utility bill, must be allocated to each month. You should then generously round down the result to get your allowance. This amount can be used to pay off future debt, but should still give you the opportunity to build up reserves.
You save interest costs
A loan always entails interest costs. Your bank earns on this additional burden that it lends you money. As lending rates are generally at historically low levels, the ancillary costs of a loan are currently very favorable. Nevertheless, there is scope for these costs, the so-called interest rate framework. For example, if interest rates on a particular loan are priced above 2%, that does not have to mean the last word. Your final interest rate depends on the credit rating in all cases. The 2% mentioned as an example of a lower limit exists for borrowers with good or very good creditworthiness. If there are cuts in creditworthiness, the interest on the loan may soon be slightly higher. Therefore, the final interest rate is always fixed after the credit check.
With a second applicant, the conditions can be improved. If you include a partner as an applicant in your contract, security for the bank increases. In the event that as a borrower you no longer repay your installments, the lender may hold your contractor responsible. With such conditions, it is possible to get to a cheaper interest rate. Especially for larger projects such as the financing of expensive real estate is worth a joint borrowing. This can be over the entire term considered a cheaper percentage usually save thousands of euros in interest costs.
Your credit line is growing
Your possible credit limit, as well as the determination of interest rates depends on the credit rating. By including a second party in your loan, you can increase the amount of the loan in your favor. In the partner loan, both income is assumed as security and the possibility of a higher repayment rate. You benefit from this if your own income is insufficient for the desired loan amount. A partner loan is therefore suitable for joint purchases that are costly. With such a credit model, you can save interest costs together with your contract partner and can even realize a sum that you probably would not have got.
Alternatives to the partner loan The partner loan you benefit from lower interest costs or the higher credit limit. The combination of both advantages is also conceivable through joint borrowing, since you minimize your risk of default towards the bank. As an alternative to the inclusion of a contracting party, such results can also be achieved through securities. You can, for example, contribute value investments, tangible assets or a guarantee. If your lender accepts them, it will have an additional value in case you can no longer pay your installments.
The self-employed benefit
Those who earn their living as freelancers or through independent work often have disadvantages in assessing creditworthiness. The creditworthiness of applicants with permanent employment is generally considered to be more secure. Especially the self-employed have to prove their income extensively, for example through tax records of the past years. If credit seekers live off government benefits or earn relatively little, it is almost impossible to get their own loan without further ado.
Those who belong to these risk groups can get money through a partner loan. At first, it does not matter who is included as the second applicant in the contract. It may, for example, be the life partner, but also a friend or relative. As long as one’s own creditworthiness is sufficiently “supplemented” by that of a second applicant, nothing stands in the way of a permit.
Negative effects on partner credit
When engaging in the possibility of a partner loan, you need to be aware of the risks in advance. Initially, both applicants have an obligation to the lender. If one of the contractors loses his job or disputes with one another, this is not the bank’s problem. The same applies to loans taken by spouses and divorced. Liability in such scenarios does not mean that both have to pay only half of the installments. As soon as one of the two signatories of the partner credit fails, the other one must automatically step in. Especially when it comes to a larger loan with a long maturity, this aspect should receive special attention. Play it safe by setting rules before making an application. These should at least determine who pays how much and how it behaves in the case of separation with the repayment of the remaining debt.
Bad credit is reflected
What contributes to improving credit quality can also have the opposite effect. If your credit partner has negative credit bureau entries or low revenues, it will work. Both the conditions for favorable interest rates and the volume of credit deteriorate. It is best to clarify such details before applying for a partner loan. First, get an idea of your own credit bureau score and that of the other applicant. If the conditions for the loan by the co-applicant worsen, the partner credit is discouraged. In such circumstances, it is better to apply for the loan on your own.
In addition, it is important to formulate credit inquiries without obligation, by asking only for the terms of the loan. With the correctly formulated “request credit terms” you save your own credit bureau score. Convenient and easy access to current offers with a credit comparison. There you will find the cheapest credit offers at a glance and can inform without obligation.
After a break, the debt remains
The widespread assumption that spouses always have to put together loan applications does not apply. First of all, everyone is responsible for themselves and does not have to be responsible for the spouse’s or spouse’s obligations. Basically, the one who has to pay has to pay. This means that one spouse can not be held liable for the other’s credit debts. If a bank always requires the signatures of both spouses, you should think twice about it. If there is no reason to do so, it is better to check with another provider for a loan.
If a partner loan exists between spouses, this is often a reason for conflicts after a separation. The bank will rightly insist on the repayment of debts. A lender does not have to compromise on divorce disputes. It is even up to him to use only one of the two borrowers for the full installment, if the other difficulty. In such constellations, there are several steps open to the one who has to pay the full installment. Thus, the now sole debtor can claim compensation from the ex-partner. The amount of the rate is then deducted, for example, from the revenue used as the basis for calculating maintenance payments.
Legal exceptions In exceptional cases, it may happen that, despite a partner loan, only one of the two applicants is responsible. Thus, the Higher Regional Court of Brandenburg decided that a joint real estate loan after the divorce is henceforth only to be paid by the man. He was shown the main interest in the loan, since only he is in the land register. In addition, his wife moved out after the separation, so he is the sole user of the property.
Basically, a partner loan is suitable for obtaining a loan together. In the ideal case, sufficient conditions should be created. On the one hand, this concerns the highest possible creditworthiness of both applicants. This can improve the credit conditions and increase the credit line. At least one of these two aspects should benefit you. On the other hand, it must be clarified before the partner credit that advantages and disadvantages are equally distributed. Of the benefits, both borrowers should have as much as they bear the costs and risks. When purchasing a property, for example, regulations are to be recorded in a marriage contract. This concerns above all the question, how it proceeds with the installment in case of a case.
From the lender itself no expectation is expected. On its side counts only that the monthly installments for the repayment arrive punctually. For this purpose, he can decide for himself which contract partner he takes to which extent and in which responsibility. Therefore, risks do not only exist if the relationship fails. The loss of a contractor can also occur through illness or loss of employment. Investigate such scenarios in good time to limit risk and prevent conflicts. In order for both applicants to benefit from the partner loan, reliability and trust should be a prerequisite.